Limited companies borrowing more than individual landlords

73% of buy-to-let purchases in the second quarter of this year were carried out by limited companies, a 10% increase on the first quarter of the year.

The data from Mortgages for Business also revealed that 51% of buy-to-let lending in the second quarter of the year can be attributed to limited companies.  

This is the first time limited companies have exceeded individual landlords. 

Buy-to-let investors are turning more and more towards limited company structures with an aim to avoid the recent changes involving mortgage interest tax relief. 

As of April 2017, relief for mortgage interest on residential properties will be limited to the basic rate of Income Tax, and this measure will be phased in more slowly between 2017-2020. Investors who convert their properties into limited companies won’t be affected by this.  

Steve Olejnik, the Chief Operating Officer at Mortgages for Business, said: “Landlords are increasingly looking to limited company structures because of the benefits they bring in the form of tax efficiencies and softer affordability testing.”

But Olejnik warned buy-to-let landlords that transferring to a limited company was not without its drawbacks or complications.  

“The structures are not without their hurdles, however, and we recommend all our clients take professional tax advice before deciding how to proceed.”

It may even be the case that landlords who opt for a limited company structure are actually worse off than individual landlords, as recent research has suggested, so gaining professional tax advice must be the first step for landlords.   

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